Sessional lecturer entitled to superannuation support
The Federal Court has agreed with the ATO that a lecturer providing services to a higher education provider was a common law employee and therefore entitled to superannuation support, despite being engaged as an independent contractor.
The ATO reviewed the situation and concluded that the lecturer was entitled to receive superannuation support. This was on the basis that for superannuation guarantee purposes they were either an ‘employee’ within the ordinary meaning of that term, or was what is referred to as an ‘extended definition employee’ as someone engaged primarily for the provision of their labour services.
Some of the factors which indicated the lecturer was in an employment relationship with the higher education provider included:
- that the lecturer was engaged in his personal capacity and not through an interposed entity (such as a company or trust);.
- that the higher education provider had a right of control over the lecturer, including the question of how, when and where he was required to provide the relevant teaching services; and
- the mode or manner by which the lecturer was to be remunerated was clearly expressed by reference to the time that the lecturer was engaged in delivering lectures and marking, not by reference to any readily identifiable or quantifiable product or result.
Editor: Please feel free to discuss with our office any scenarios where a ‘contactor’ is engaged personally, remunerated on an hourly basis for hours worked and is not provided with superannuation support.
TD 2022/11 – Discretionary trusts and corporate beneficiaries
When a trustee of a trust makes a decision to
create an entitlement to income of the trust in favour
of a corporate beneficiary (i.e., a privately held
company), certain steps need to be taken to ensure
that if the entitlement to the distribution remains
unpaid (that is, no cash equal to the amount of the
entitlement is paid to the corporate beneficiary),
that this does not trigger what is called a ‘deemed
dividend’ in the hands of the trust.
A deemed dividend is likely to give rise to unwanted
taxation consequences for the trust.
Historically, one way to avoid triggering a deemed
dividend in such circumstances was to place the
amount representing an unpaid distribution in a
sub-trust for the benefit of the corporate beneficiary.
With these sub-trust arrangements, the relevant
funds are generally being invested in the main trust
to be used for working capital or to make plant and
equipment or real property acquisitions.
These sub-trust arrangements were typically
based on interest only loan arrangements, with
the requirement that the principal be repaid at
the end of either seven years (i.e., as an Option
1 arrangement) or ten years (i.e., to as an Option
2 arrangement).
The ATO has now formed the view that for
entitlements to trust income that come about from
1 July 2022 (effectively from the 2023 income
year) that these interest only Option 1 and Option
2 arrangements are no longer sufficient to avoid the potential triggering of a deemed dividend with
respect to any unpaid present entitlements.
Broadly speaking, from 1 July 2022, in relation
to an unpaid distribution payable to a corporate
beneficiary, one way to avoid the unpaid distribution
giving rise to a potential deemed dividend is for
the unpaid distribution to be replaced with what is
referred to as a complying Division 7A loan.
These Division 7A loans are made under S.109N of
the Income Tax Assessment Act 1936 (‘ITAA 1936’).
Ordinarily, such a loan is repaid on a principal
and interest basis, over seven years, based on an
interest rate provided by the ATO for each year of
the loan, with annual minimum loan repayments
calculated based on a formula provided by the
income tax legislation.
Editor: We are happy to advise whether this recently
issued Tax Determination has any implications for
the way your family group distributes its income.
Pandemic Leave Disaster Payment reinstated
In recognition of the risks associated with more
infectious new Covid-19 variants through the winter
period, the Federal Government has agreed to
reinstate the ‘Pandemic Leave Disaster Payment’
to 30 September 2022, which was otherwise set
to end as of 30 June 2022.
Eligibility for the payment will be backdated to 1
July 2022, to ensure that anyone unable to work
owing to isolation requirements in this period,
without access to paid sick leave, is supported.
Access to these payments will commence from
Wednesday 20 July 2022, with existing eligibility
requirements to continue.
The Commonwealth and the States and Territories
have agreed to share the costs of the payment
50:50
For each 7-day period of self-isolation, quarantine
or caring, the Pandemic Leave Disaster payment is:
- $450 if you lost at least 8 hours or a full day’s work, and less than 20 hours of work: or
- $750 if you lost 20 hours or more of work.
As a reminder, Pandemic Leave Disaster Payments are assessable income and should be reported in the tax return of the recipient in the year of receipt
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.